The downward trend in the gold price was stopped for the time being thanks to the US Federal Reserve. The investment bank Goldman Sachs now recommends its customers to access the yellow precious metal, because a well-known pattern is likely to repeat itself.
• Gold price benefits from recent Fed announcements
• Burden factors for gold prices decrease
• Goldman Sachs now bullish for gold
The announcement of further measures in the fight against the economic effects of the coronavirus pandemic by the US Federal Reserve caused further uncertainty on the stock markets on Monday and could not directly support the prices. The gold price, however, was different: it rose by around five percent immediately after the Fed statement and has continued to rise since then. According to the US investment bank Goldman Sachs, the gold price probably heralded an actual turnaround after it had gotten under way in the days before.
Fed’s liquidity injection helps gold
In a new study, commodity analysts Jeffrey Currie and Mikhail Sprogis from Goldman Sachs deal extensively with the yellow precious metal and come to a clear conclusion: “It is time to buy the currency of the last refuge” – at least that is the title of the Study. Indeed, the experts believe that the Fed’s measures will now significantly reduce the negative factors that were responsible for the recent gold price losses. “We believe that the Fed’s announcement of an open ended quantitative easing is causing the funding stress [an den Märkten] will reverse, “says the ETF Trends,” the report said.
According to the experts, this financing stress was the main reason why gold – despite its status as a crisis currency – has also been under attack in recent weeks. After all, market players sold gold and other raw materials to generate liquidity that was needed elsewhere to pay for losses or margin calls. With its measures, however, the Fed is now bringing a lot of liquidity into the financial system – creating a new situation from which gold should benefit.
Pattern from 2008 should repeat itself
The Federal Reserve’s new measures will alleviate the financing stress for investors and they will pay attention to the massive expansion of the Fed’s balance sheet, the deficit increase in many industrialized countries and the concerns about the sustainability of the European Monetary Union. Yahoo Finance “in the Goldman Sachs study. “We believe this will likely lead to concerns about devaluation that was similar in the period after the global financial crisis,” said analysts Currie and Sprogis. In response to these concerns, gold is likely to regain popularity among many investors as a hedge against inflation and volatility, the two Goldman experts believe. “Accordingly, we are now probably at a turning point where fear-driven purchases are beginning to control liquidity-driven selling pressures,” the study said, according to Yahoo Finance.
According to analysts, the whole situation is similar to that of November 2008. Even then, in the financial crisis, the Fed’s announcement to launch a $ 600 billion QE program was the turning point for the gold price, which had previously been shared with others Asset classes came under pressure. After the Fed announcement, however, the precious metal continued to rise steadily. This behavior could now be repeated, it says at “MarketWatch”. “We are starting to see a similar pattern emerge with gold prices stabilizing over the past week and the rally [am Montag]”When the Fed launched new liquidity injections,” quotes the news site from the Goldman Sachs study.
Goldman Sachs analysts Jeffrey Currie and Mikhail Sprogis are not alone in this opinion. John Ciampaglia of Sprott Asset Management also sees parallels between the current situation and the global financial crisis, according to the “Financial Times”. “It’s just like in 2008 and 2009 when governments and central banks ran the money press at full speed,” he told the US newspaper.
Goldman Sachs predicts clear price increases for gold
So for Goldman Sachs analysts, it’s clear: “We’ve long argued that gold is the last resort currency that serves as a hedge against currency devaluation when policymakers act on shocks like the one we’re experiencing, to compensate, “said Jeffrey Currie, according to the Financial Times. The experts therefore recommend their customers to access now. Because now the time has come to buy “the currency of the last refuge” – and it could be worth it.
After all, according to “Yahoo Finance”, the analysts of the US investment bank also confirmed their twelve-month forecast for the gold price in the study – and are confident that the gold price will rise to $ 1,800. That would be the highest level since 2011 – and the all-time high from the same year is no longer far away.
Editorial office finanzen.ch
–
Image source: ded pixto / Shutterstock.com, Sashkin / Shutterstock.com, Stepan Kapl / Shutterstock.com
.
